Will The Stock Market Affect Your Home Purchase?
Written By: Jaymi Naciri
Thursday, February 15, 2018
The wild stock market of the past week has sent some into a panic and caused many others to take a closer look at their financial picture. But what is the stock markets impact on real estate, and should you worry if youre getting ready to buy a new home? Not much at this point, and not really, say financial experts.
So why isnt a 1,175-point drop - the largest single-day dip in history - not a concern? First, because most financial experts saw some sort of correction coming because of the robust market over the last two years and, as many expected, the market bounced back with a 567-point gain on Tuesday, although there could be more volatility in the short term.
"The stock market has been on a roller-coaster ridenbsp;since late last week, with anbsp;historic one-day plunge in trading, and a ripple effect that struck the rest of the globe Tuesday," said Inman. "But most economists will tell you the historic highs over the past two years were bound to result in a correction of sorts as investors reckon with the possibility ofnbsp;inflationnbsp;andnbsp;rising interest rates."nbsp;
Second, and most important to homebuyers, is the fact that any potential impact on real estate is expected to be nominal. "Real estate professionals, and potential homebuyers and sellers arent immune to the fears that reverberated across trading floors on Friday and again on Monday, they said, "but analysts say the effect on home prices, sales volume and lending activity will be minimal and temporary."
Play the long game
Of course, the stock market isnt one size fits all, and, depending on where your investments lie, you may, understandably, be worried. Economists and financial planners have generally had similar advice to "average investors" wondering how to respond to the stock markets volatility: Think about your objectives and, "Stay put," said CNN Money. Its all about playing the long game.
"Are you saving for retirement? A future home purchase?nbsp;If those goals are more than 10 years away, you probably dont have much to worry about.nbsp;While its hard to ignore the noise when the market experiences a dark day, its important to take the emotion out of trading."
On the other hand, if you have a more immediate goal of buying a home and your down payment is tied to your investments, its probably time to call your financial advisor and reevaluate your portfolio.
What does all of this mean for real estate?
That depends on what aspect of real estate youre talking about. Publicly traded real estate-based companies including "Realogy,nbsp;Zillow,nbsp;Redfin,nbsp;News Corp, andnbsp;Re/Max "posted modest losses between end of trading on Thursday and Mondays close," said Inman. Real estate investors also felt an immediate pinch. "The plunge also resonated through real estate investment trust stocks, resulting in a 2.9 drop in the FTSE NAREIT All Equity REIT Index Monday," said BISNOW.nbsp;But, National Association of Real Estate Investment Trusts NAREIT "economist Brad Casenbsp;said the 2.86 drop in the All Equity REIT index, though sizable, will be short-lived."
The potential for dipping consumer confidence can have a far greater impact on the overall economy and, specifically, the real estate market.
"Consumer confidence is a major consideration when people purchase durable goods and real estate," said ZACKS. "Few people are likely to commit to a big mortgage payment if they feel that their economic future is uncertain. When the stock market retreats and the value of portfolios declines, investors are impacted psychologically. Even if the portfolios are in IRAs, which will not be touched for years, peoples confidence is shaken. Loss of confidence can spread like a virus, affecting others who have not been financially hurt but have nevertheless become unnerved."
Which leads us back to the overall economy. U.S. jobs data >
The stability of real estate as an asset should shield the industry - and those who are looking to be a part of it, even as stocks rise and fall. "Back when the internet bubble burst in the year 2000, during that period, thats when the housing market began to steadily rise," National Association of Realtors Chief Economist Lawrence Yun told Inman. "That means that as people felt their financial assets to be very volatile, people were looking for more stable assets, which they perceived that real estate could provide."
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